Professional services firm PwC has said its Iraqi business has grown by 30 percent over the past year.

Ismail Maraqa, a PwC senior partner overseeing Iraq operations, told the Financial Times:

“If you look at the region, Iraq is one of the few promising emerging markets out there … The business opportunities are huge. They are trying to grow the oil sector by six or seven times.

“In the past it was only oil and gas, Now you have construction, communications, banking, lawyers, healthcare, education.”

Mozhar Mohamed Saleh, an adviser to the central bank and professor of finance at two major Baghdad universities, added: “I think there’s a big potential here. The future is bright … But because the security situation is not very good, it’s a hazy picture.” According to the World Bank, the economy grew more than 8 percent in each of the past two years, and Iraq’s central bank predicts even higher growth.

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International companies are overlooking security worries and a recent spike in violence to set up shop in oil-rich Iraq, a country that was engulfed in a civil war only five years ago.

Lured by the country’s vast oil wealth and sizzling growth rates, international companies have in recent months launched or expanded operations in Iraq’s finance, agriculture and construction sector as well as in the energy industry that is the mainstay of the country’s economy.

PwC, the professional services firm, said its Iraq business had grown by 30 per cent over the past year as international and Iraqi companies race to bolster their presences in a country that is Opec’s second-largest oil producer, despite a slight drop in output in 2013 because of sabotage and ageing infrastructure.

“If you look at the region, Iraq is one of the few promising emerging markets out there,” said Ismail Maraqa, a PwC senior partner overseeing Iraq operations. “The business opportunities are huge. They are trying to grow the oil sector by six or seven times.”

The renewed business interest coincides with an uptick in violence rooted in political tensions between the dominant Shia and minority Sunnis and Kurds, as well as spillover from the civil war in neighbouring Syria. At least 659 Iraqis were killed and 1,373 wounded in political violence in November. In December, gunmen shot dead 15 Iranian workers at an oil pipeline east of Baghdad, a rare case of foreigners being targeted in the country’s overlapping conflicts.

And the violence shows no sign of letting up. Suspected Sunni Islamist militants on Christmas day set off three bombs in the heavily Christian Dora district of the capital, killing at least 38, including 24 who died at the conclusion of a church service. Western regions of the country were on edge on Sunday after the Shia-dominated government’s security forces arrested a popular Sunni lawmaker and killed his brother and five guards in a raid.

But Iraq’s economic potential is trumping security worries. After decades of socialist policies that scared off private investors, 12 years under harsh international sanctions and more than a decade of civil strife, Iraq’s economy has expanded dramatically. Its gross domestic product has doubled since 2003 to above prewar levels. Over each of the past two years, the economy grew more than 8 per cent, according to the World Bank, and Iraq’s central bank predicts even higher growth.

“I think there’s a big potential here. The future is bright,” said Mozhar Mohamed Saleh, an adviser to the central bank and professor of finance at two major Baghdad universities. “But because the security situation is not very good, it’s a hazy picture.”

Iraq’s relatively safe Kurdish north has long attracted foreign investors, especially companies from Turkey, Iran and the Gulf states. But interest in the rest of Iraq has increased, especially since the 2008 departure of US troops, said Lady Emma Nicholson, executive chairman of the Iraq Britain Business Council. The trade organisation’s 54 members, up from 43 last year and 39 in 2011, include Deloitte, ExxonMobil and an affiliate of Caterpillar. Citigroup said in June that it would open an office and three major Lebanese banks – Byblos, BankMed and Bank Audi – have opened or are about to open branches in Iraq.

The bulk of the new interest remains in Iraq’s lucrative energy sector. But companies are examining other sectors. “In the past it was only oil and gas,” said PwC’s Mr Maraqa. “Now you have construction, communications, banking, lawyers, healthcare, education.”

Security concerns remain the most severe impediment to further investment and eat into profits as companies must hire armed guards and buy armoured vehicles.

“We have opened the door for these companies and encouraged them to come by explaining what the security situation is, the measures we take to protect our visitors and the measures the companies that invest take on the ground,” Lady Nicholson said. “Iraq is not in a settled neighbourhood but it’s doing very well. There are many safe areas where you can do business, and one or two hotspots that I’d advise you not to go to. It’s a question of knowing the territory.”

But beyond security, Iraq remains a difficult regulatory environment to navigate. The government of prime minister Nouri al-Maliki has advanced efforts to reform laws to make it easier for foreign companies to set up shop and repatriate their profits. But the country’s administrative culture has changed little from the time of Saddam Hussein, who kept Iraq an isolated backwater for decades.

“Though the environment has improved somewhat, the actual bureaucracy is a problem. It’s part of the cost of doing business,” said Mr Saleh.

Despite the challenges, companies are making calculated risks to do business in Iraq. Standard Chartered, which opened a branch in Baghdad last month, is scheduled to open branches in the northern city of Erbil this month and the southern port city of Basra next year.

At the Baghdad’s branch’s inaugural ceremony, attended by Mr Maliki and other officials, the bank’s Iraq chief executive Gavin Wishart said large-scale planned state infrastructure projects would require international financial mechanisms. The Maliki government, which may be voted out in April elections, has allocated $860m for low-cost housing in 2014 alone, as well as investments in new roadways, railways and bridges.

“We are optimistic about the prospects of the Iraqi economy,” Mr Wishart said. “As an international bank, we believe there is substantial opportunity to play a leading role in the economic development of the country.

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